With the new aged care reforms set to come into effect in the coming weeks, Equity Trustees has reiterated the changes could have “significant” implications for practitioners with SMSF trustee clients.
Speaking to SMSF Adviser, Equity Trustees senior manager Anna Lawton said advisers should make their trustee clients aware that they are going to have to contribute more to the cost of aged care after July 1 this year.
“It is going to be even more important that [trustees’] affairs are in order, to make sure they can afford it and they can structure it properly, and that the fund can actually still function,” she said.
“[The reforms] will see retirees paying more for their admission to, and ongoing care in, aged care facilities. The bottom line is that the cost of aged care will increase, particularly for part-pensioners and self-funded retirees.”
After July 1, once a person reaches age pension age, the value of their superannuation counts as an asset for both aged care and age pension purposes, Ms Lawton explained.
A resident’s co-contribution will be assessed based both on assets and income rather than the under the current system of income only, she added.
Ms Lawton also noted accommodation payments will be structured slightly differently, with asset and income levels determining how much a resident needs to additionally contribute towards their daily care payments.
Ms Lawton said there are a number of considerations SMSF practitioners need to pass onto their clients before the new regime commences.
“[An] implication trustees need to think about is if they lose capacity – that is a very important one,” she said.
“What have trustees got in place, who can step in on their behalf, who can’t, have they even considered [incapacity] in the first place?” she added.
Ms Lawton also said structuring the right investment strategy that reflects a trustee’s age is also essential.
“Make sure that the investment strategy of the fund is in line with doing things like selling down assets to pay for aged care and the ability to liquidate quickly to pay for lump sums,” she said.
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